Construction spending weaker than headlines appear

May 7, 2026

Construction spending grew 0.6% in March after February spending slid 0.2%. Data for both months were released simultaneously as the Census Bureau catches up to delays from the late-2025 government shutdown. Compared to a year ago, spending was up 1.6% in March. (The data are not adjusted for inflation.) 

According to the producer price index (PPI), inputs to construction (excluding labor costs) jumped 1.6% in March on surging energy costs. The jump in diesel fuel PPI was the largest one-month jump since the 1990 Gulf War. Other input prices such as steel, aluminum and copper continued their upward march driven by both the war in Iran and persistent tariffs.

Private residential construction soared 1.7% in March after flatlining in February. The move was almost entirely due to single-family construction. Builders kept incentive programs running; more than 60% offered sales concessions. Larger builders absorbed the margin hit more readily than smaller ones, but builders across the industry felt the margin compression. The brief window of sub-6% mortgage rates in late February and early March provided a boost. The outlook turned in March when applications for building permits plunged. That points to cooler housing construction activity ahead.

Multifamily construction eked out a 0.3% gain in March after a 0.2% gain in February. Years of record completions have flooded the rental market, pushing rents lower and diminishing builder appetite. They are expected to deliver significantly fewer multifamily units this year.  

Private non-residential construction dropped 0.2% in March after falling 0.4% in February. Data center construction, captured under the office category, remains a structural growth driver. Spending hit another new record in March, up 34% from a year ago. Data center construction is running into real constraints as rising energy costs combine with local opposition. Electricity grid limitations are increasingly dictating how fast projects can be developed. Manufacturing construction continued on a long retreat, now well below its mid-2024 peak, but still the largest spending category in non-residential construction. 

Public construction spending, mostly by state and local governments, fell 0.2% in March after losing 0.3% in February. Educational infrastructure and highway and street construction (the largest portion of construction spending by governments) tumbled 0.6% and 0.1%, respectively.